Income Tax Appellate Tribunal - Pune
Shri Ajay N. Yerwadekar,, vs Department Of Income Tax on 14 August, 2015
आयकर अपील
य अ धकरण] iq.ks यायपीठ "बी" iq.ks म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी आर. के. पांडा, लेखा सद य
एवं ी वकास अव थी, या"यक सद य के सम#
BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.636/PN/2014
"नधा%रण वष% / Assessment Year : 2011-12
ITO (TDS)-3, Pune .......... अपीलाथ /
Appellant
बनाम v/s
Shri Ajay N. Yerwadekar, .......... यथ /
Plot No.12, Sector No.24, Respondent
Pradhikaran, Nigdi,
Pune - 411 044.
PAN No. AAAPY9775E
नधा रती क ओर से / Assessee by : Shri Abhay Avchat
यथ क ओर से / Department by : Shri.Hitendra Ninave
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :11.08.2015 Date of Pronouncement:14.08.2015
आदे श / ORDER
PER R.K. PANDA, AM :
This appeal filed by the Revenue is directed against the order dated 09-12-2013 of the CIT(A)-V, Pune relating to Assessment Year 2011-12.
2. The grounds raised by the Revenue are as under :
"1. The Ld.CIT (Appeals) erred in deleting the demand raised of Rs. 74,67,727/- u/s 201(1)/201(1A) of the Income Tax Act, 1961 in respect of lease premium payment paid to Pimpri Chinchwad New Township Development Authority (PCNTDA).2 ITA No.636/PN/2014
2. The Ld.CIT (Appeals) erred in considering the fact that the premium paid to PCNTDA is upfront payment as pre-condition for entering into lease agreement.
3. The Ld.CIT (Appeals) erred in not appreciating the fact that the deed entered into by the deductor with PCNTDA was not a transfer deed but a lease deed and explanation to section 1941 clearly stipulates that any payment by whatever name called under any lease deed/agreement is to be taken as rent for TDS purpose.
3. The appellant craves leaves to add, alter or amend any or all the grounds of appeal."
3. Facts of the case, in brief, are that the assessee is the proprietor of Sea Face Beach Resort, Polly House, Shri Samarth Engineering Company businesses. During the course of TDS verification in the case of Pimpri Chinchwad New Town Development Authority (PCNTDA) on 07-11-2012 it was noted that the assessee had entered into lease agreement for 99 years with PCNTDA on the terms and conditionis laid down by the lessor in the lease deed dated 28-02-2011 for Plot No.1/1 in sector No.32A of the Pimpri Chinchwad New Town Development Authority, as per the terms of lease deed. The Assessing Officer reproduced clause 2 of the lease deed and came to the conclusion that provisions of section 194I of the I.T. Act are applicable in respect of payment of Rs.6,07,13,928/- claimed to have been made in respect of premium for acquisition of Lease hold rights for 99 years as the same was nothing but rent. Accordingly, he raised demand u/s.201(1)/201(1A) of the I.T. Act after confronting the assessee on this issue.
4. In appeal the Ld.CIT(A) held that payment of lease premium to PCNTDA was a precondition for entering into lease agreement and therefore it cannot be said that the same was paid under the terms of lease agreement. He further observed that the stamp duty has been paid on the market value of the plot represented by lease premium.
3 ITA No.636/PN/2014Relying on various decisions including the decision of the Mumbai Bench of the Tribunal in the case of Navi Mumbai SEZ Pvt. Ltd. vide ITA No.738 to 7741/Mum/2012 for A.Yrs. 2006-07 to 2009-10 wherein it has been held that lease premium paid by the assessee to the City and Industrial Development of Maharashtra Ltd. (CIDCO) for acquiring development and leasehold rights for a period of 60 years was not required to be subject to deduction of tax at source u/s.194I of the I.T. Act, the CIT(A) held that the AO was not justified in raising the demand u/s.201(1)/201(1A).
5. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
6. After hearing both the sides, we find an identical issue had come up before the Tribunal in the case of ITO Vs. Preetam Medical Foundation & Research Centre vide ITA No.190/PN/2014 order dated 16-01-2015 wherein similar demand u/s.201(1) & 201(1A) was raised by the AO in respect of lease premium paid to PCNTDA. The CIT(A) deleted such demand and on appeal filed by the Revenue, the Tribunal dismissed the appeal filed by the Revenue by holding as under :
"5. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the demand raised under sections 201(1) and 201(1A) of the Act in respect of the lease premium paid to Pimpri Chinchwad New Township Development Authority (PCNTDA). In the facts of the case before us, the assessee had entered into 99 years lease agreement through its Chairman with PCNTDA for using 3261 sq. mtrs. of land located on Plot No.1, in Sector 13, Chikhali, Taluka Haveli, Pune. The said land was to be used for education purposes as per clause (N) of the lease deed. The assessee paid lease premium of Rs.1,37,36,963/- for the said plot and further agreed to pay sum of Rs.100/- per annum for the entire period of lease. The Assessing Officer (TDS) was of the view that the assessee was required to deduct tax at source under section 194 I of the Act at the time of payment of lease premium to PCNTDA. The Assessing Officer issued a show cause notice to the assessee and also issued summons to the deductor. In reply, the assessee explained that the transaction between it and PCNTDA was a transaction of sale and further appropriate tax return had been filed by it.4 ITA No.636/PN/2014
The Assessing Officer was of the view that the transaction between the parties was not that of transfer, but of lease and there was no transfer of ownership of the property, but the same was leased for use either for commercial or residential purposes as approved by the Lessor. However, the Assessing Officer referred to the various restrictions on the Lessee / assessee put up by the Lessor and it was observed by the Assessing Officer that this was not a case of freehold transfer or sale and the assessee was not the absolute owner of the property. The Assessing Officer thus, concluded that the assessee was liable to deduct tax at source under section 194 I of the Act on the lease premium paid to PCNTDA. The assessee having failed to deduct tax at source, was held to be in default under section 201(1) of the Act at Rs.13,73,696/- and further interest under section 201(1A) of the Act was charged at Rs.82,416/-. Reliance was placed on the ratio laid down by Chennai Bench of the Tribunal in Foxconn India Developer (P) Ltd. Vs. ITO (TDS) (supra).
6. The CIT(A) after considering the facts and reply filed by the assessee, observed that no doubt, after 99 years of lease, the lease hold right expired and the Lessor was vested with the full rights on the said plot of land, with the option either to renew the lease for further period and take back the possession of the land. However, the preliminary clause of the lease agreement reflects that the payment of lease premium was a pre-condition for entering into lease agreement. The CIT(A) has reproduced the preliminary clause of the lease agreement at page 7 of the appellate order, which are not being reproduced for the sake of brevity. The CIT(A) thus, held that the payment of lease premium of Rs.1,37,36,963/- was a pre-condition for entering into the lease agreement and the same was not under the lease deed, therefore, the payment of lease premium fell outside the purview of definition of rent as provided under section 194I of the Act. It was further pointed out by the CIT(A) that there is no merit in the reliance placed upon the decision of Chennai Bench of the Tribunal in Foxconn India Developer (P) Ltd. Vs. ITO (TDS) (supra) as the same was distinguishable on facts. In the facts of the case before the Tribunal, the issue in question was upfront payment of lease and further the said upfront payment was part of the conditions for acquiring leasehold rights, unlike the present case where, the payment of lease premium was a pre-condition for entering into a lease agreement. The CIT(A) placed reliance on the decision of Mumbai Bench of the Tribunal in Navi Mumbai SEZ(P) Ltd in ITA No.738 to 7741/Mum/2012, relating to assessment years 2006-07 to 2009-10, vide order dated 12.08.2013, in order to hold that the payment of lease premium to PCNTDA being a pre-condition for entering into lease agreement, could not be said to be paid under the terms of lease agreement. Further, stamp duty had been paid on the market value of the plot represented by lease premium. In view thereof, the Assessing Officer was directed to delete the demand created under sections 201(1) and 201(1A) of the Act.
7. The issue arising in the present appeal is squarely covered by the ratio laid down by the co-ordinate Bench of the Tribunal in ITO Vs. Camp Education Society (supra), wherein it was held as under:-
5 ITA No.636/PN/2014"6. We have heard the rival contentions and perused the record. The assessee was an educational society registered under section 12A of the Act. The assessee was running various schools and colleges in the city of Pune. During the year under consideration, in order to establish another school in Pimpri Chinchwad area, the assessee in reply to an advertisement by PCNTDA, applied for a plot on leasehold basis. As per the Bid document, where the Bid quoted by a party accepted, the said party was required to pay the quoted amount i.e. the premium within 3 months of the letter of allotment. In case such premium was not paid within period of 3 months, 25% of the Tender deposit was to be fortified and balance amount was to be refunded without any interest. The Tender document stated that the Tender was for the purpose of sale of reserved plots and as per the document full premium was to be paid to PCNTDA and lease agreement would be entered with the party. The assessee entered into a lease agreement with PCNTDA for 99 years and the lease rent was Rs.100/- per annum for the period of 99 years. The assessee accordingly, deposited the premium amount of Rs.2,20,24,860/-. After receiving the premium amount, the licenser i.e. PCNTDA agreed to execute Lease Deed to convey / transfer / assign the leasehold rights. The Lease Deed authorizes the assessee to build / construct any building on the said plot of land. The case of the assessee was that the payment of premium was a pre-condition for obtaining the lease rights and it was only after payment of the lease premium, the lease agreement was entered into and bundle of rights were obtained by the assessee.
7. The Assessing Officer held the assessee to be default in respect of the TDS payable on such lease rent payment to PCNTDA. Reliance was placed on the ratio laid down by the Chennai Bench of the Tribunal in Fox Conn India Developer (P) Ltd. (supra). The assessee was held to be in default for non- deduction of tax on source under section 194I of the Act on the lease premium paid to PCNTDA and demand under section 201(1) of the Act was raised and interest under section 201(1A) of the Act was charged, raising a demand of Rs.22,90,585/-.
8. The CIT(A) vide para 8 referred to the preliminary clauses of the agreement entered into between assessee and PCNTDA and pointed out that the lease premium finds mention in the Lease Deed but the said payment of lease premium was a pre-condition for entering into lease agreement. The CIT(A) thus, held that same was not under the lease deed and the payment of lease premium falls outside the purview of definition of rent as specified in section 194I of the Act. The CIT(A) further observed from the ratio laid down in the case of Fox Conn India Developer (P) Ltd. (supra) was distinguishable on the facts as in that case issue in question was upfront payment and not lease premium. Further, upfront payment was part of consideration for acquiring leasehold rights unlike the present case where payment of lease premium was pre-condition for entering into lease agreement and therefore the facts of the case were clearly distinguishable. Further reliance was placed on the series of decisions, under which such similar payment of lease premium was held to be not subject to deduction of tax at source under section 194I of the Act.
9. We find that similar issue of payment of lease premium arose before the Mumbai Bench of the Tribunal in the case of Navi Mumbai SEZ (P) Ltd. in ITA Nos.738 to 740/Mum/2012 for assessment years 2006-07 to 2009-10, wherein the Tribunal in its order dated 12.08.2013, held that lease premium 6 ITA No.636/PN/2014 paid by the assessee to the City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO) for acquiring development and leasehold rights for a period of 60 years, was not required to be subject to deduction at source under section 194I of the Act. Further another Bench of the Mumbai Tribunal in the case of M/s. Wadhwa Associates in ITA No.695/Mum/2012, vide order dated 03.07.2013, held that TDS was not required to be deducted under section 194I of the Act in respect of payment of lease premium to M/s. MMRD Ltd.
10. In view of above said facts and circumstances, wherein the lease premium was paid to PCNTDA by the assessee as a pre-condition for entering into a lease agreement, the same cannot be said to have been paid consequent to the lease agreement executed between the parties. Further, the CIT(A) has given a finding that stamp duty had been paid on the market value of the plot represented by the lease premium, which has not been controverted by the learned Departmental Representative for the Revenue. Relying upon the ratio laid down by the Mumbai Bench of the Tribunal in three different cases, we uphold the order of CIT(A) in holding that the lease premium paid by the assessee is outside the purview of section 194I of the Act and the Assessing Officer was not justified in raising the demand under section 201(1) and 201(1A) of the Act. The grounds of appeal raised by the Revenue are thus, dismissed."
8. Following the same parity of reasoning, we hold that where the lease premium paid to PCNTDA was a pre-condition for entering into the lease agreement, the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194 I of the Act. In addition, the assessee had paid stamp duty on the market value of the plot represented by the lease premium and the said finding of the CIT(A) having not been controverted by the learned Departmental Representative for the Revenue, we find no merit in the appeal filed by the Revenue. Accordingly, we uphold the order of CIT(A) and dismiss the grounds of appeal raised by the Revenue."
7. Since the facts of the instant case are identical to the facts of the case decided by the Tribunal in the case of Preetam Medical Foundation & Research Centre (Supra), therefore, respectfully following the decision of the Coordinate Bench of the Tribunal and in absence of any contrary material brought to our notice we find no infirmity in the order of the CIT(A) deleting the demand raised u/s.201(1)/201(1A) of the I.T. Act in respect of lease premium paid to PCNTDA. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed.
7 ITA No.636/PN/20148. In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 14-08-2015.
Sd/- Sd/-
(VIKAS AWASTHY) (R.K. PANDA)
या"यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
iq.ks Pune; #दनांक Dated : 14th August, 2015.
lrh'k
आदे श क( )"त+ल प अ,े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु(त(अपील)s / The CIT(A)-V, Pune
4. आयकर आय( ु तs / The CIT-V, Pune
5. +वभागीय त न.ध, आयकर अपील य अ.धकरण, "बी" iq.ks / DR, ITAT, "B" Pune;
6. गाड फाईल / Guard file.
आदे शानस ु ार/ BY ORDER,स या+पत त //True C स या+पत त //True Copy// व र2ठ नजी स.चव / Sr. Private Secretary आयकर अपील य अ.धकरण, iq.ks / ITAT, Pune